Limits of linkage-based development: an assessment of the oil and gas sector in North Patagonia, Argentina

Abstract

ABSTRACT The research note assesses the prospects of development through extractive industries in north Patagonia (Argentina), a region that holds considerably large unconventional oil and gas deposits. The author applies the linkage approach from the literature on global value chains, paying particular attention to backward and forward production linkages because they may trigger a structural transformation of the regional economy. He finds that north Patagonian firms have managed to plug into the upstream sector. There are efforts to facilitate an unconventional hydrocarbon cluster and even hopes of local firms venturing into markets abroad, which would enable them to become specialized suppliers. However, their present role is largely limited to the provision of generic products and services, and it appears unlikely that this will change due to financial and other constraints. Even though north Patagonia benefits from linkages, the disillusioning findings lead the author to call for a less optimistic understanding of linkage-based development in global value chains: resource peripheries may be stuck at a level of generic, low value-added activities.